Wall Street erased gains yesterday as traders reacted to relatively dovish statements from Fed officials. The Dow Jones, S&P 500, and Nasdaq 100 indices declined by 1.92%, 2.37%, and 3.00%, respectively. Technology companies like Tesla and Apple led the declines. In a statement to congress, Jerome Powell made a case for more stimulus as the economy’s growth starts to ease. In another statement, Vice Chairman, Richard Clarida said that the country was still in a deep hole.
The Dow Jones and other indices are also falling because of the slow decoupling of the United States and China. In recent months, tensions between the two countries have been rising. Indeed, they have now created an entity list of companies that are likely to be banned. Also, the indices are looking ahead to November, when the US heads to its general election. With violence being reported in most major cities, there is a likelihood that the situation could worsen before and after the election.
Elsewhere, in Asia, most indices are also in the red. In Hong Kong, the Hang Seng index is down by more than 2% with Xiaomi being the leading laggard. Banks like HSBC, Hang Seng Bank, and BOC Hong Kong are among the worst performers. Casinos like Sands and Galaxy Entertainment have also continued to drop as the number of COVID cases continue to rise. In mainland China, the Shanghai composite and China A50 are down by more than 1%. In Japan, the Nikkei 225 index has fallen by more than 1% also.
In Europe, futures are also in the red. Those tied to the DAX index, FTSE 100, CAC 40, and Stoxx 50 are all down by more than 1%. In addition to the rising number of cases, investors are worried that growth has stalled. That is mostly because of the flash manufacturing and services PMI numbers that were released yesterday.
In currencies, the dollar index has continued its rally as investors rush to its safety. The US dollar is up by 0.18% against sterling and 0.45% against the Swedish krona. It is also up by 0.15% against the Canadian dollar and by 0.03% against the euro. Later today, the dollar will react to further statements by Fed officials and US new home sales data.
The daily chart below shows that the Dow Jones futures have made strong moves recently. First, the index has fallen from its September high of $29,187. Second, it has moved below the important green ascending trendline that connects the lowest levels in June, July, and August.
Third, Dow Jones has moved below the 25-day and 10-day exponential moving averages and the 78.6% Fibonacci retracement. All these things are bearish, which means that the index is likely to continue falling as bears aim for the support at $26,000.
